Move, Inc. Q2 2008 Earnings Call Transcript

Move, Inc. (MOVE)

Q2 2008 Earnings Call

August 8, 2008 5:00 pm ET

Executives

Todd Friedman - Investor Relations

W. Michael Long – Chief Executive Officer & Director

Lorna M. Borenstein – President

Lewis R. Belote, III – Chief Financial Officer

Analysts

Jason Helfstein – Oppenheimer & Co.

Jeetil Patel – Deutsche Bank

William Morrison – ThinkEquity

Mitch Bartlett – Craig-Hallum

Presentation

Operator

Good afternoon, my name is Shemika and I will be your conference coordinator. At this time I would like to welcome everyone to the Move, Inc.’s Second Quarter 2008 Financial Results Conference Call. (Operator Instructions) Todd Friedman will begin the call.

Todd Friedman

Good afternoon everyone and welcome to our second quarter 2008 earnings call. On the call today are Mike Long, our Chief Executive Officer; Lorna Borenstein, our President; and Lew Belote, our Chief Financial Officer.

Today’s call is being webcast from the Investor Relations section of our website, www.investor.move.com, and will be available for replay shortly after we conclude. A copy of our press release issued earlier this afternoon is also available on our website.

Please be advised that some of the comments that will be made today constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve potential risks and uncertainties concerning Move’s expected financial performance as well as Move’s strategic and operational plans. These potential risks and uncertainties include, among others, decreases or delays in advertising spending and market acceptance of new products and services. Additional factors are discussed in the company’s annual and quarterly reports which are filed with the SEC and available on our website. All information discussed on this call is as of August 7, 2008, and Move undertakes no duty to update this information. Results projected on the call today may differ materially from actual results and should not be considered as a guarantee of future performance.

On the call today we will also be discussing non-GAAP financial measures in talking about the company's performance. Reconciliations of those measures to GAAP measures can be found in the table attached to our press release.

I’ll now turn the call over to Mike Long.

W. Michael Long

Thanks, Todd, and thank you all for joining us today.

The second quarter demonstrated a number of key facts about our business. Though our revenues were down slightly from 2007, our market leadership and deep industry and consumer relationship have provided Move with a very stable business foundation to sustain us through even the toughest market.

As an example, Realtor.com started the quarter with a large broker renewing their contract, but at a lower level, as they chose not to purchase a large inventory of products they had previously purchased on behalf of their agents. Because of the timing, the Realtor.com sales team was not able to resell all this inventory in the second quarter.

However, due to their extraordinary efforts and the strong response from our customers, Realtor.com achieved its highest June and July sales in history. Lew will provide more details on the financial results later on the call.

We will not operate our business waiting for the market to recover but are acting decisively to create the right business model to thrive in both good and tough times. The issues and challenges facing the residential real estate market are creating a permanent dislocation in the offline real estate advertising market, with online spending benefiting in the long term.

As the market recovers, the needs of consumers and advertisers will be quite different than they are today. As the market leader in revenue, advertisers, and consumer engagement, we are implementing a clear strategy to meet those changing needs.

To sustain our competitive advantage, we are adjusting Moves business operations to optimize our financial performance while enabling us to better focus on assets and development initiatives that are essential to our strategic investment programs.

It is only through a combination of both smart expense reductions and continued investment that we will sustain and grow our market leadership and position us as the primary beneficiary when the real estate market recovers.

To that end, we announced today, in conjunction with our earnings release, that we have decided to sell Welcome Wagon and make significant reductions in our operating expenses.

Let’s first discuss the steps we are taking to sell our Welcome Wagon operations. We have evaluated alternative strategies for this brand but have concluded it is not a strategic fit for our future plans. We have engaged investment bankers to assist us in selling the business. As a result of our decision to sell Welcome Wagon, it is now reflected as discontinued operations in all periods presented.

We believe that selling Welcome Wagon will ultimately improve our focus and allow a new owner to develop an improved business model for the brand. It will also allow us to refocus strategic resources on our core business.

Now let me turn to our decision to make changes in our operating structure that should allow us to materially lower our ongoing operating expenses. We plan to eliminate more than $20 million in annualized expenses by the end of this year. These changes will move us closer to our goal of 20% EBITDA margins.

While our review of expenses will cover all areas of our business, we will focus on continuing the strategic investments that we believe have significant growth potential, maintaining the strong relationship with our loyal customers, protecting our profitable revenue streams, and eliminating unprofitable revenue.

All elements of our business are included in this process to ensure we are operating in the most efficient manner. This process is well underway and will continue into the fourth quarter, so you should assume we will not realize the full benefit this year.

As a result of these changes, it is likely we will incur restructuring charges in both the third and fourth quarters of 2008. We will have better visibility of the timing and amounts when we report third quarter earnings to you in late October.

These are the right decisions that will give Move the platform to leverage the next wave of growth in our industry.

I will now turn the call over to Lorna.

Lorna M. Borenstein

Thanks, Mike.

As you can tell from Mike’s comments, we’ve been focused on shoring up our core business and aligning all of our resources to execute on our strategy. Our strategy is centered on providing the best experience for the consumer so that they continue to return to Move for their real estate needs.

The strategy is composed of the following three pillars: providing the best online real estate search experience; delivering unique proprietary content to extend our relationship with consumers throughout the Move cycle and convert them into recurring site users; and understanding consumers’ behavior and intent so we can improve the relevance and effectiveness of our advertising.

As we move through this process of realigning our resources, it is imperative that we create an operating structure that will perform well in a challenging market as well as thrive when the market is healthy. Leaders take advantage of market downturns to extend their advantages and increase market share. I believe the facts demonstrate that we are doing this.

Through the first half of this year, our revenue grew 1% over the prior year, though it declined 2% in the second quarter. When you consider the current market, that says something about our position. In a market where home sales declined by 18% year-over-year, our results demonstrate our ability to weather the storm and do so far better than competitors.

The reason for our enduring stability can be found in our fundamental strategy. We are the single most trusted real estate source for consumers and through both good and bad markets consumers turn and return to Move to guide them through their home search. It is this trusted relationship between Move, our brokers and agents, our advertisers, and consumers that drives our significant engagement advantage over our competitors.

It is the total minutes spent that demonstrates value to advertisers. If you’re a portal driving traffic through front page promotions that don’t attract high-quality users, you may enjoy an increase in unique users but won’t see a corresponding increase in total minutes. By contrast, the Move network continues to dominate in terms of engagement with more than three times the minutes of all the portals combined, and more than five times the minutes of Zilla and Truella combined.

We believe that this advantage with the consumer is the single biggest driver of advertising sales and will only get better with the redesigned Realtor.com. We discussed the redesign on the last on the last call so I won’t spend too much time describing the site, but I encourage all of you to go visit Realtor.com and opt into the beta to see the improvements.

The new interface streamlines the all-important search process by reducing the number of clicks it takes to see search results and allows consumers to more easily those search results without leaving the page. It also provided cleaner navigation and presentation of information, making the site easier to view, scan, and search.

We have added up to four free photos to all listings while our enhance listings will allow up to 25 photos. All photos are now 140% larger since the new release. This is a real improvement in the visual depth of our listings that together with the other site improvements will greatly enhance the quality and transparency of the search experience for our consumers.

We also upgraded the paid listing product to provide even greater value for our paying advertisers. Showcase listings have been improved to help our customers further differentiate themselves and their listings.

The early internal data from the redesign is striking. We are experiencing consumer engagement improvements over the classic realtor sites that we believe validate our approach and our strategic investment. For example, users are 20% more likely to send a listing to a friend, 50% more likely to request a showing from a realtor, 60% more likely to click through to a broker or agent’s website, and most impressively, five times more likely to go all the way from the home page to a listing’s detail page.

We are also seeing a continuation of our success registering approximately1% of all site visitors. In fact, in Q2 we enjoyed a 60% increase in the number of registrations. The number of consumers electing to receive alerts increased three times over Q1. We are now sending more than 0.5 million alerts every month. These alerts typically have a better than 50% click-through rate, driving consumers right back to our advertisers’ listings.

As we feed consumers more relevant content to help guide them along the process, their relationship with Move should continue to grow. And as we learn more about consumers’ behavior and capture more registrations, it will enable us to create more effective advertising solutions.

As you have heard us say many times, we believe that current market conditions are creating a permanent dislocation in real estate advertising spending patterns. For example, we have heard from our broker and agent advertisers that many of them are considering, or have already eliminated newspaper advertising altogether. Earlier this week the Los Angeles Times announced they were discontinuing their weekly real estate section.

At the same time, the number of agents who have purchased our products is at an all time high, even though cancellations continue in this tough market. We currently have 293,000 agent customers through our broker/company showcase partnerships and another 80,000 agents who have contracted directly with us. Working with them, we are providing marketing solutions that are much more cost effective.

When the market recovers, online will be the advertising venue of choice. And Realtor.com will be the preferred channel, with many offline advertising options permanently disrupted. We expect the total real estate advertising spend to decline, but the online portion will be a far larger percentage than it is today.

Now, as we move forward with our strategy to continue as the authority for consumers and advertisers in this real estate market, we must be sure that all of our businesses compliment each other. In the past I outlined three criteria that are essential to any business that is a part of Move. One, they have to be strategic to our vision and adhere to the three-color strategy that we have adopted. Two, they have to delight consumers and/or advertisers. And three, they have to be able to deliver profitable growth.

The decision to sell Welcome Wagon was not made lightly, however, we know that we have to not only be willing, but decisive, about shifting or eliminating resources if they cannot contribute to the overall growth of the business. The same is true of our planned expense reductions. The objective is simple: to create the right business mix and organizational structure that will lead to consistent revenue growth and EBITDA.

There is no reason why this company, with our undisputed market leadership, operating in a huge market, should not deliver consistent returns to its shareholders and employees.

In closing, we remain confident about the opportunity ahead of us. While we are cognizant of the market and economic headwinds we are facing, we believe that with focus on our operational structure we will be able to lay the foundation for future success. One thing that remains constant is that we are the clear market leader in all important metrics and we are committed to extending that leadership position through the end of this year and beyond.

I will now turn to Lew for a discussion of the quarterly financial results.

Lewis R. Belote, III

Thanks, Lorna.

Our second quarter revenue was $62.4 million compared to $62.5 million in the second quarter of last year. As Mike mentioned, the decline of revenue was primarily due to our new homes business in Realtor.com. Even though Realtor.com was down for the quarter, we are seeing substantial increases in new sales in recent months. Through May 2008 our sales and renewals, net of cancellations, were flat compared to 2007. However, in June and July we saw an increase of net sales of $1.2 million, or 11% in each month, compared to 2007. The Realtor.com sales and marketing team is doing a phenomenal job of showing our realtor customers the value of our advertising solutions.

For the quarter Realtor.com revenue declined 1% and 4% from the first quarter of 2008 for the reasons noted earlier. Top Producer grew 5% compared to last year and was flat from last quarter. New Homes and Rentals together declined 6% from the same quarter last year, but only 1% from the first quarter. This was primarily due to the continued decline in the new homes market.

The Consumer media business was down 7% compared to 2007 but grew 18% over the first quarter. This is a result of replacing the sales resources we described last quarter and working with advertisers to demonstrate the effectiveness of our reach with consumers.

As a result of our decision to sell Welcome Wagon, it is now reflected as discontinued operations in all periods presented. Our 10-Q, which we expect to file tomorrow, will have a summary table of the results of our discontinued operations in Note 5 but will no longer be part of the Consumer Media segment or our ongoing discussions.

Our net loss for the quarter was $2.2 million compared to net income of $4.4 million for the same quarter of 2007. The 2007 net income was influenced by substantially reduced stock-based compensation as we reversed $6.5 million in previously recognized compensation expense related to our long-term incentive plan. Our net loss for the quarter was much improved over the $4.6 million loss in the first quarter of 2008.

EBITDA for the second quarter was $5.7 million, or 9% of revenue, compared to $8.2 million, or 13% of revenue, last year and $3.4 million, or 6% of revenue, in the first quarter of this year. The sequential improvement in our EBITDA over Q1 2008 is primarily related to some one-time severance and facilities cost in the first quarter.

Our gross margin for the quarter was 82%, which is consistent with last quarter but down slightly from the same quarter last year. Product development expenses were $6.8 million, or $2.4 million lower than the second quarter of last year. As we noted last quarter, we made substantial changes to this area of our business and are getting much better results, as Lorna outlined earlier. We will continue to invest in this area, but as with all areas of our business, we will make those investments with a sharp focus on profits and growth.

Sales and marketing expense increased approximately $850,000, or 4%, from the second quarter last year. However, it declined $1.0 million, or 4%, from the first quarter as we improved the SEO on our sites and reduced our direct SEM spend.

We recorded a substantial reversal of stock-based compensation in our G&A expense in the second quarter of 2007 that artificially lowered that expense last year. So year-over-year comparisons are difficult. The primary increase year-over-year was due to legal fees associated with patent litigation and increased facility costs. G&A declines 12% from the first quarter due to one-time severance and facility charges we incurred last quarter. As part of the cost review that Mike outlined, we will be addressing all of our G&A expenses.

In looking at our segments, our Real Estate Services revenue declined 1% from the second quarter of last year. The operating margin in the quarter was 26% compared to 30% for the second quarter of 2007. The decline in operating income was primarily due to increased online marketing expense incurred this quarter.

In our Consumer Media segment revenue was down 7% from the second quarter of 2007. However, compared to the first quarter of 2008 revenue was up 18%, highlighting the efforts of the new leadership that joined earlier this year and the focus on sales productivity. This contributed to our improved operating margin of 9% compared to an 11% operating loss last quarter. We expect to see continued improvement in this segment in the second half of the year.

Turning to the balance sheet, cash and short term investments at June 30, 2008, were $48.5 million. As we reported on our last call, we hold $129.0 million in student loan auction rate securities. Earlier today a settlement was announced by Citigroup with the New York Attorney General’s Office and the SEC related to their marketing of auction rate securities. Citigroup was the broker who purchased the auction rate securities on our behalf. While it is too early to determine the actual benefit to us, it appears a liquidity solution for our investments will emerge before the end of 2009. We are aggressively pursuing the recovery of our investments and will report any progress we make.

On our balance sheet you will note deferred revenue has declined compared to the end of 2007. This is largely a result of our continued growth in broker advertisers at the same time we experience a slight decline in our individual agent subscriptions.

Individual agents generally pay for their annual subscription up front so the payment shows up in deferred revenue and we recognize the revenue ratably over the 12 month contract. In contrast, most of our broker company advertisers pay on a monthly basis, which has no effect on deferred revenue.

Our main sources of cash during the second quarter were as follows: $5.7 million in EBITDA and $1.5 million in interest income. They were offset by $1.8 million in capital expenditures, $3.1 million in reduction in working capital, $500,000 in payments on capital leases, and $1.3 million used to fund our discontinued operations.

With that I’ll open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Jason Helfstein with Oppenheimer & Co.

Jason Helfstein – Oppenheimer & Co.

I have to applaud the decision on Welcome Wagon. Not the outcome but as far as making the decision, obviously it was difficult for a major segment.

So just first on that. So the $20.0 million you’ve targeted in cost savings, would that include any cost savings from Welcome Wagon or because that’s already reported as discontinued ops, the $20.0 million would be incremental.

Lewis R. Belote, III

Jason, it would clearly be over the financial results we presented as continuing operations. So the reduction in Welcome Wagon is not in that $20.0 million.

Jason Helfstein – Oppenheimer & Co.

On the Realtor.com, it was down 1% year-over-year but you said that June and July were up 11%, so effectively, this one client who cancelled really hit August. What does that mean for the third quarter for Realtor.com? And just a bigger picture question, what was your last price increase, or when was your last price increase at Realtor.com and how do you think about pricing for the rest of the year? And has the AB testing had any impact yet on kind of showing the effectiveness and why you should be able to drive price?

Lewis R. Belote, III

I’ll take the first part of that, Jason. Keep in mind that we said sales were up 11%. Those are generally annual contracts so it’s not an 11% increase in revenue in June and July. So if that trend continues, we would expect to see revenues begin to grow, but it’s a tough market out there.

Lorna M. Borenstein

Jason, I’ll take the second part of your question. We haven’t done a price increase on the realtor-based products in some time. In fact, I believe it would have been the early part of 2007, late part of 2006.

W. Michael Long

It’s been a year. We made a decision in this difficult market to not raise prices, for Realtor.com at this point.

Lorna M. Borenstein

And what we are seeing, because we’re not actively selling the new site yet, against the beta. We’re going to get that into full audience release before we’re actually actively selling it, but we’ve been explaining it as we go along to brokers and agents and their reaction is very positive. And obviously our data that we’ve been sharing, the preliminary data, is quite compelling.

So, wouldn’t want to speculate on what would happen in the future, but we think it’s a value to the customer as well as to the consumes will definitely be demonstrated when we’re at full GA.

Operator

Your next question comes from Jeetil Patel with Deutsche Bank.

Jeetil Patel – Deutsche Bank

You know that $50.0 million expense run rate you had in Q2, I guess the annualized savings that you talked about of $20.0 million, would that imply that that’s going to be more like $45.0 million or were you using more of a year-end 2007 number, obviously adjusted for Welcome Wagon, or is it off of the Q2 numbers and going ahead?

And then second, in general, obviously things seem to be getting tougher out there, but do you think you’re at a point, from an agent’s standpoint, that on your core, kind of call it the media business, you’ve got a very stable base right now or do you think there’s still a lot of movement in light of the environment out there? Are you seeing a lot of attrition in the agent base in the existing customer list or have you worked through most of that already?

Lewis R. Belote, III

Jeetil, on the first part of your question, it’s $20.0 million in annual operating expenses and we don’t necessarily plan to stop there but that’s our target right now. Everything in the business is subject to review, but you would expect to see an impact of $5.0 million on quarterly expenses once those changes are implemented.

Lorna M. Borenstein

And Jeetil, for the second part of your question, I think we do have quite a stable base. We still are dealing with cancellations as we always do and it’s very hard to say where are we in this market. Nobody knows and it’s hard to predict. I wouldn’t want to speculate. But our feeling is that we’ve got a pretty solid base and expect that the reaction that we are getting from the new site and data should help both our agents as well as the company, with its performance, once it’s got GA.

Jeetil Patel – Deutsche Bank

So the cancel rate has not gotten worse, it’s not gotten better, it’s just pretty consistent at this point?

Lorna M. Borenstein

It’s quite consistent.

W. Michael Long

And that’s right. The pattern is still, as has been true in our previous calls, is that since we focused very heavily over the last couple of years on the top producers, their cancellation rate remains at a much lower level than the tier-2 and tier-3 agents, who many are obviously dislocated in this current market.

Jeetil Patel – Deutsche Bank

And how would you characterize it on Top Producer in light of, are you still seeing some cancellations there, given this slower growth in that business or is it just the new customers.

Lorna M. Borenstein

We actually have seen a slight increase in cancellations in Top Producer. Not unexpected. Nothing that we’re overly concerned about but it definitely seems that it’s caught up a little bit with the stable cancellations we’ve been seeing elsewhere.

Lewis R. Belote, III

And we’re seeing some of those that stay with us buying additional products, such as Market Snap Shot and Top Marketer. So that’s what contributing to the growth, it’s not subscriber growth.

Operator

Your next question comes from William Morrison with ThinkEquity.

William Morrison – ThinkEquity

Can you give us any kind of a sense of where you at least think the cost might come out of the $20.0 million? Maybe break it down a little bit for us.

W. Michael Long

The major areas, Bill, are associated with obviously consolidating facilities. For example, we’ve already started with consolidating our Massachusetts facility into our Scottsdale operation. The eliminating of a lot of outside consultants. A reduction of cost structure associated with unprofitable revenue streams. G&A. And a very strong focus on the return on investment on our marketing spend and finding much more efficient ways to generate traffic from our historical SEM spend. So those are some of the major areas.

William Morrison – ThinkEquity

And, Lew, can you tell us what the legal fees and any other kind of one-time, even if they’re going to go on for the next few quarters, kind of non-core expenses in the non-allocated G&A line?

Lewis R. Belote, III

The legal expense, while I haven’t given an absolute number, they increased over second quarter of last year by $1.4 million. You’ll see that in the MD&A when we file. They’re relatively consistent with last quarter but we’ve got a lot going on, as you’ll see in our notes, relative to the progress of both the Keith Lee patent litigation and the Real case. So we’re having to deal with pending trial dates and that type of thing. And, frankly, they’re just not positions we can cave on, we have to defend our position there.

William Morrison – ThinkEquity

Were there any other?

Lewis R. Belote, III

Yes, we had some severance and facilities cost of a one-time nature last quarter. Nothing else unusual this quarter.

William Morrison – ThinkEquity

I’m still a little bit confused about the way you characterized the strength in Realtor.com in June and July. I was wondering if you could run through that again? I think I heard that your sales were up $1.2 million in each month, June and July, above last year. Was that correct? And then, just once more, if you could describe the difference between, I’m assuming when you say sales is different than revenue it’s [inaudible] versus revenue.

Lewis R. Belote, III

Yes, sales are the annual contracts, so yes, they were up $1.2 million, or just over 11%, in each month, which is a very positive trend when you look at January through May, sales compared to last year were flat. So if you continued an 11% of 12% run in sales, then probably eight or nine months out you would start to see that kind of percentage increase in revenues. But, as you know, that revenue is recognized over 12 months.

Operator

Your next question comes from Mitch Bartlett with Craig-Hallum.

Mitch Bartlett – Craig-Hallum

Lorna, maybe you could talk about the registrations on the site. Last call you talked about, what was it, 100,000 in a single month? And now you’re sending out 0.5 million alerts?

Lorna M. Borenstein

Yes, we are continuing to register every month, roughly 1% of the people who visit are volunteering to register, and give us their e-mail contact information so that we can effectively market to them with content that is relevant to what it is that they are searching for on the site.

And so what we’re doing is sending out now, 0.5 million of these alerts. The way that it works is you come to the site, you perform a search, you register, and you say to alert me when something new comes up that’s relevant to my search criteria. And we will send you an alert and market those either new listings or changes to those listings to you. That’s what we mean by it.

Mitch Bartlett – Craig-Hallum

And the total number of e-mails that you have now?

Lorna M. Borenstein

I don’t have the number off the top of my head.

W. Michael Long

Basically 1% of realtor’s traffic.

Lorna M. Borenstein

Every month we’re adding another 1%, we’re not churning out necessarily those that we’ve lost because we don’t get a lot of people who ask us to no longer send them the e-mails. They tend to want the information, ongoing.

Mitch Bartlett – Craig-Hallum

Is there advertising in these?

Lorna M. Borenstein

Thank you. We are starting to put advertising in them. We’re actually testing different types of advertising in these newsletters and alerts.

Mitch Bartlett – Craig-Hallum

The 293,000 agent customers is up from I think was it 260,000? That are broker showcase customers. Last quarter you quoted 3,500 brokers had signed up. What is the total broker count at this point?

Lorna M. Borenstein

We don’t know it off the top of our heads.

Mitch Bartlett – Craig-Hallum

The larger question is, just over time, basically, it would seem the brokers come on like crazy and the agents churn a little bit. So what does that look like, those two metrics that you just gave, 293,000 and 80,000 customers? Like two quarters ago or a year ago. Maybe you could just put it in context a little bit. I know the average ASP on the agents has changed.

W. Michael Long

Mitch, we had about 3,500 broker customers at the end of last quarter. And it’s just over 3,900 at the end of this quarter.

And the point that you mentioned about churn, a lot of those, yes, the individual contracting agents does decline but not all of it’s churn, some of them are picked up though those broker contracts.

Mitch Bartlett – Craig-Hallum

At a bulk rate, right?

Lewis R. Belote, III

Right.

Lorna M. Borenstein

And your number last quarter in terms of the number of agents covered by those company showcase deals, last quarter it was 265,000 and it’s now 293,000.

Mitch Bartlett – Craig-Hallum

And Top Producer, what was the monthly ASP on Top Producer. I mean, there is some churn in the base, right? But they are subscribing to more products?

Lewis R. Belote, III

Yes, there’s been some cancellations, obviously offset mostly by new sales. I think there’s been a very slight decline in total subscribers over the past year. But we’re seeing some of those recurring subscribers buy additional products, such as Market Snap Shot.

Mitch Bartlett – Craig-Hallum

And is there an ASP number?

Lewis R. Belote, III

65,000 was the last number we quoted, the total number of subscribers, and it’s not materially different from that.

Operator

Your next question is a follow up from Jason Helfstein with Oppenheimer & Co.

Jason Helfstein – Oppenheimer & Co.

So with the auction rate situation, has anybody yet offered to buy your securities at some kind of discount and I guess depending on the types of securities you have, it could be different levels of a discount, but it seems to me even if you sold that at, I don’t know, a 20% discount or something like that, a lot of think you stock is well more than 20% discounted, maybe 50% or 100% discounted, so even if you had to sell those at a discount to be able to take advantage of buying the stock, kind of at the $2.00 level, it seems like that would be a net win for shareholders. So just curious, your thought process along those lines.

Lewis R. Belote, III

Jason, the market is non-existent, so there is nobody really making offers for these auction rate securities. We’re aware of a very few companies that have gone out and sought buyers. There was one company in Colorado that we’re aware of that sold theirs at a 24% discount because they absolutely had to have the cash to fund plant expansions. So those are the kind of discounts you’re seeing in a distressed sale. They had a number of their securities that had been reset to a zero-coupon rate, whereas we don’t have that.

It’s been our position since February that ultimately because of the credit rating of these securities, that we’ll be able to get the return of the principal at par. And we were pleased to see the Citigroup action today and we’re going to aggressively pursue getting our cash back as quickly as possible.

As we’ve said before, we haven’t needed the cash to fund operations. As you see, we’re increasing our cash balances through our EBITDA performance. So there isn’t any reason to take any hasty actions at this point.

Operator

There are not further questions at this time.

W. Michael Long

Thank everyone for participating in our call today and we look forward to discussing the company again with you in October.

Operator

This concludes today’s conference call. You may now disconnect.

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2008 Aug 11 06:37 PM